Search-Based Reassessment – Jurisdictional Defect – Section 153C Overrides Section 147 & Section 148 – Lack Of Independent Material For Reassessment – Writ Petitions Allowed

Analysis Of Search-Based Reassessment And Its Impact On Jurisdiction. (Para 12-14) Interpretation Of Section 153A, Section 153C, And Their Overriding Effect On Section 147 & Section 148. (Para 16-18) Application Of Supreme Court Rulings In Abhisar Buildwell Pvt. Ltd. And Shyam Sunder Khandelwal On The Jurisdiction Of Reassessment. (Para 20-23) Final Ruling Quashing The Reassessment Notices. (Para 24-26)

Held:

The Reassessment Notices Issued Under Section 148 Were Without Jurisdiction, As They Were Solely Based On Materials From Search Proceedings.

Relief Granted : The High Court Quashed The Reassessment Notices And All Consequential Proceedings.

Acts And Sections Discussed:

• Constitution Of India, Article 226 – Writ Jurisdiction Was Invoked To Challenge The Reassessment Notice.
• Income-Tax Act, 1961, Section 132 – Search And Seizure Proceedings Formed The Basis Of Reassessment.
• Income-Tax Act, 1961, Section 147 – Jurisdiction Of Reassessment Was Challenged.
• Income-Tax Act, 1961, Section 148 – Reassessment Notice Was Held As Without Jurisdiction.
• Income-Tax Act, 1961, Section 153A & Section 153C – Held That These Provisions Overrode Section 147 & Section 148 In Search-Related Assessments.

Subjects:

Reassessment Notice – Search Proceedings – Jurisdiction Of Assessing Officer – Bogus Loan Entries – Accommodation Entries – Incriminating Material – Shell Company – Income Escaping Assessment – Override Of Section 147 – Quashing Of Notice

Facts:

Nature Of The Litigation

• Multiple Writ Petitions Were Filed Under Article 226 Of The Constitution Of India Challenging Reassessment Notices Issued Under Section 148 Of The Income-Tax Act, 1961.

Who Approached The Court And For What Remedy?

• Petitioners, Including Sejal Jewellery & Others, Approached The Bombay High Court Seeking Quashing Of Reassessment Notices Issued Under Section 148, Contending That The Proceedings Should Have Been Initiated Under Section 153C Of The Income-Tax Act, 1961.

Reason For Filing The Case

• The Assessing Officer Issued Reassessment Notices Based On Materials Found During Search Proceedings.
• The Petitioners Contended That Since The Foundation Of Reassessment Was A Search Conducted Under Section 132, Reassessment Should Have Been Carried Out Under Section 153C And Not Under Section 147/148.

What Had Already Been Decided Until Now?

• The Assessing Officer Rejected The Objections Filed By The Petitioners And Continued Reassessment Proceedings.

Issues:

a. Whether The Reassessment Notices Issued Under Section 148 Were Legally Valid When The Search Proceedings Under Section 132 Formed The Basis Of The Action?
b. Whether The Income-Tax Department Should Have Proceeded Under Section 153C Instead Of Invoking Section 147?
c. Whether The Materials Relied Upon For Reopening The Assessment Were Independently Sufficient To Justify Reassessment Under Section 147?

Submissions/Arguments:

Petitioners’ Contentions

a. The Entire Reassessment Was Based On Search Materials, Necessitating Proceedings Under Section 153C.
b. Section 153C Has An Overriding Effect Over Section 147, Rendering The Reassessment Notices Invalid.
c. No Independent Material Apart From Search Findings Was Cited, Violating The Jurisdictional Requirements Of Section 147.

Revenue’s Contentions

a. Search Materials Were Not The Sole Basis Of Reassessment, And Independent Inquiries Were Made.
b. The Department Had Valid "Reasons To Believe" That Income Had Escaped Assessment, Justifying Reopening Under Section 147.

Ratio:

When The Foundation Of Reassessment Was A Search Conducted Under Section 132, The Only Permissible Route For Reopening Assessments Was Through Section 153C, Which Overrides The General Provisions Of Section 147 & Section 148.